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The Sad State of Finances in English Football

Ryan RivieraContributor IFebruary 11, 2010

LONDON, ENGLAND - FEBRUARY 10:  Portsmouth football club fan David Maples waves a club flag outside the High Court on February 10, 2010 in London, England. Portsmouth FC have seven days to provide a 'statement of financial affairs' proving they can pay their creditors to avoid a winding-up petition.  (Photo by Oli Scarff/Getty Images)
Oli Scarff/Getty Images

Football is nearing a financial collapse the likes of which have not been seen in the history of the league.

Every week it seems we hear of another club on the brink of disaster, owing millions to the taxman or not paying their wages or being sold from one international billionaire to another.

It's not just happening in England where long-established clubs such as Liverpool are close to total collapse, but across the world where poor ownership and irresponsible spending has brought many clubs to bankruptcy.

According to UEFA's analysis of the books of 650 European clubs, 20 percent of the clubs have losses and debts so large that they have no feasible way to pay them off.

Manchester United

One example of a club with poor ownership is Manchester United, which was bought by American tycoon Malcolm Glazer a few years back. Manchester United at the time was one of the richest and most profitable clubs in the entire footballing world.

However, Glazer financed the £1.6 billion purchase of the club with hedge fund loans and bonds with huge interest rates, then shifted the approximately £1 billion in debt onto the club itself.

Because of this, the club has gone from incredibly profitable to currently being £650 million in debt. Most of the money the club makes during the season now goes to paying the interest on the debt, and they have not been able to invest in players because of it. They now focus on old veterans and younger stars they've had for years for the core of their team and their performances have suffered because of it.

The Glazers having taken as much money as they can out of the club as they can now want to sell it, but nobody's buying. With the global financial crisis the story of the day, investors have no interest in a debt-ridden football club. Unlike the next club, they aren't in danger of folding any time soon.

Portsmouth F.C.

The real poster boy for the crisis of English football finances is Portsmouth Football Club, affectionately known as Pompey by its fans.

They are recent additions to the Premier League, having reached the top flight in 2003. They languished in the bottom of the table for their first few years in the EPL before being bought by the Russian businessman Sacha Gaydamak in 2006.

Gaydamak threw money at the club, allowing them to buy up international players and the best of the EPL. In 2008, 90 percent of club income was going to players' wages and the club was over £60 million in debt. The sugar daddy Gaydamak claimed he and the club were not in financial trouble, but accepted an offer for the club from the Dubai businessman Sulaiman al-Fahim on May 26th.

A rival bid from then-CEO Peter Storrie and his partner Ali al-Faraj was rejected and the deal was completed Aug. 26th. A lack of money caused Portsmouth to sell its star players including Peter Crouch soon after.

Fast forward to Oct. 2009, when it comes out that Portsmouth was having trouble paying its players. al-Faraj stepped in and quickly purchased 90 percent of the club from al-Fahim. Portsmouth used the influx of cash to purchase even more players, sinking them deeper in debt as the Premier League placed a transfer embargo on them.

Portsmouth in December announced that they had not paid their players and most likely would pay them late in January. As a result of the debt and unpaid tax bills, the British tax collectors filed a winding-up petition.

Best case, the club gets a points deduction and enters administration. Worst case, the club is completely liquidated and shut down. No Premier League club has ever been shut down in the middle of the season.

The transfer embargo was partially lifted in January, allowing the club to sell players and pick up free agents. Despite the income from selling a few players, the club will most likely not pay their players again in February. Even the club website was temporarily down due to non-payment of bills in January.

This is absurd.

Just last week, on Feb. 4th, Portsmouth were taken over by the Hong Kong businessman Balram Chainrai. He is rumored to have given the club £20 million, but none of it was applied to the debt.

What can be done?

Since 2006, several English clubs have gone into administration during the season. These clubs include Crystal Palace, Leeds United, Chester City, and many others. Over 60 football clubs have gone bankrupt in the last 20 years.

Football is and always has been a business, and as long as a football club is seen as a status symbol and outlet for money for personal fame and glory by billionaires, clubs will continue to be used and thrown aside when their novelty runs out.

The need for financial reform in English football is dire, but how can it be accomplished?

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